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Monday, December 2, 2013

Depreciation Report Received! - But is it of value?

I have written about this before, but I am repeatedly reminded and angered that there is still so much going wrong with this process.

As most Strata are aware, as of Dec 13, 2013, all Strata should have had a Depreciation Report (also called 30yr Capital Planning Report) prepared. They will need 75% of the owners to agree on an annual basis if they choose to not have this report prepared, but Strata that are going this route are finding it much more difficult to sell units in the complex because the buying public is demanding this information.

I was recently at a BCBEC seminar where Tony Gioventu of http://www.choa.bc.ca spoke on the subject. Tony estimated that as many as 60% of Strata have not yet completed these reports AND have not officially opted out of the requirement to do so. Many are just ignoring the requirement putting the Strata in violation of the law and opening up the Strata council to possible legal recriminations.

But of those that are proceeding and having this report generated, many are finding that not all reports are equal and many do not have the information needed to make informed decisions. Many reports do not meet the requirements set out in the act.

One particular are of concern that Tony elaborated on was the complicated nature of air parcels and how they divvy up the responsibility and cost of maintaining and repairing the Strata's assets. Many times, these agreements are complex enough to require legal interpretation of who the various parties are and what will be their responsibilities.

Tony also went on to say that he hoped the market will flush out those providing sub-standard reports and that is what my primary concern is. As a home inspector, I have now read a dozen or so of these reports. Some have been prepared by world class building envelope firms and some have been prepared by second rate engineering houses or even worse BY A FELLOW HOME INSPECTORS.

As a very well trained home inspector, I know more than many in my industry when it comes to building envelope construction and maintenance. I would still never dream of going into the field of providing these depreciation reports to Strata and feel it is also totally inappropriate that any fellow home inspector would provide these services as well.

A conversation at my table reinforced this conviction in spades. I was at the table with several old timers from the now defunct BCIPI organization I used to belong to. But there was also a relatively new ASTTBC certified inspector at the table who had the newly created ASTTBC RRFA (L) certification as well. He was certified and encourage by ASTTBC to provide depreciation reports on unsuspecting Strata.

At one point, this individual (who is on a Strata Council) started to slander one of the world class engineering firms I recommend to all my multi-family clients. His Strata had hired this company and received a report from them. He was claiming that the report was missing assets (doors on an upper deck level) and also had lifespans for wall assemblies that he felt were in error stating that the report had a longer life span for a face sealed stucco assembly compared to a rains-screened stucco assembly.

I was sufficiently shocked and upset by his claims, that I investigated them with the company he was slandering. It took only minutes to get a response on the specifics of the 'dispute' even though I had not provided the name of the inspector, addresses, or even the city of the Strata (because I did not know any of this information at the time). Turns out that the doors, because they were in a protected environment, were in a different section of the report that had a different renew schedule compared to more exposed assets, and the stucco wall 'discrepancy' was because some of the complex had been recently remediated and other parts had not. Obviously recently remediated walls (whether rain-screened or not) would have a longer life span than assemblies that were much older and at the end of their useful life.

But here is an individual Certified by ASTTBC as a RRFA (L) who does not even know how to read a professionally created report, what do you think are the chances that he can write one? A look at the RRFA (L) requirements on the ASTTBC website sheds some light on the real issue - lack of training. After completing just one 72 hour course, the ASTTBC home inspectors are authorized to prepare these reports on all Strata up to 2 stories. This could even include Strata with hundreds of townhouses. The large engineering companies typically use BCIT trained Building Envelope Technologists to prepare these reports. The technologists have multiple years of full time schooling and even then, they are under the supervision of more experienced engineers as they prepare these reports.

Who do you think prepares the better reports? Who should you insists on hiring for your next reporting needs?

Those interested can contact me through my website, and I will provide a list of the top firms for your report needs.

Further information on depreciation reports may be found on these links provided on the http://www.choa.bc.ca website.

Depreciation Reports

The B.C. provincial government has introduced new
regulations making depreciation reports mandatory for strata
corporations in B.C. Strata corporations of less than 5 units will be
exempt from the requirements, plus a strata corporation may consider
exempting itself by passing a 3/4 vote resolution. Changes to the Form
B, Information Certificate were also introduced.

A copy of the Strata Property Act Form B (as of March 1, 2012) may be found here (PDF) or here (Word doc).

A copy of a Depreciation Report Request For Proposal may be found here (PDF) or here (Word doc).

A copy of the OIC pertaining to 1) how long a strata
corporation must maintain depreciation report records, and 2) when a
strata corporation that was formed after December 14, 2011 must obtain a
depreciation report is available here (PDF).